Facebook Pages Are a Bad Investment for Small Businesses

In my last four posts I’ve shared some of the lessons that I’ve learned from helping set up lullubee.com, a new business that makes and markets kits for making crafts. After we launched the site and figured out how to take orders and ship products, the next task we faced was to get more visitors to the site, and ultimately more sales. In the next few posts I’ll cover several of the techniques we implemented, but in this post I’ll focus on FacebookFacebook marketing.

Once you set up your page, you need to get users to visit it and, hopefully, to “like” it. The reason you want people to like your page is that your posts will then appear on that users news feed. Over time this will allow you, according to Facebook, to start “building loyalty and creating opportunities to generate sales.” The first method to get likes is to promote it on your own website using Facebook social plugins. As this costs nothing, you may as well do it, but the percentage of visitors that click on these is typically very small. The second is to purchase Facebook Ads that persuade people to visit your page and to like it. The irony of spending money to promote our Facebook page instead of our site was not lost on us.

After some experimentation I was able to create several ads that successfully generated likes on our page at costs that averaged from $0.27 to $0.57 per like. We spent some money and built up several thousand likes, all the while optimizing the campaign to better target likely customers. We justified the expense as it seemed to be analogous to building up a database of email addresses of people that wanted to learn about our site and our products. However, we shortly discovered our error.

Once we started posting on our Facebook page, we were shocked, shocked, to see that not all the users that liked our page were seeing our posts. For example, with over 6,000 likes on our page, a typical post would only be seen by fifty to several hundred people. To reiterate, only 1% to 5% of the people that liked our page saw our posts. If we were justifying our expense as analogous to building a database of emails, then it was a database that only allowed you to access a tiny, randomly selected, subset each time it was used.

Not quite what we had expected.

Facebook, of course, has a solution for this quandary. Unsurprisingly it involves paying Facebook yet again. NextNext to each post is a small “Promote” button which innocently suggests that for the mere sum of anywhere from $5 to $300, you can have your post reach from 500 to 50,000 people. This is equivalent to paying from $6 to $10 CPM, advertising rates typically paid for premium ad inventory, to have your post appear on the news feeds of people for whom you have already richly paid Facebook once before. Bear in mind that this is just for your post to appear fleetingly on their feed, with no guarantee that they will see it or click on it.

We have done over 20 promotions now at varying costs from $5 to $50, and the results in terms of users actions have been dismal. The effective cost per user action is over $2, and on some campaigns it can even reach $6 or $12. If we only look at “page likes” and “link clicks”, and leave out “post likes”, “post comments” and “post shares”, whose value is even more ephemeral, the cost per action goes up significantly, from $6 to $20 and in some cases $50. Compared to the alternatives, these are unreasonably expensive. Unless Facebook is charging other companies an order of magnitude less than the rates we are seeing, Facebook promotions are simply not a viable option for small businesses.

Our biggest disappointment was our misunderstanding of how Facebook Pages work. Instead of building a database of users that you can contact at will, you are essentially paying Facebook to build a list of people that you can then advertise to.

Facebook, you can’t have it both ways. Either ask businesses to pay for likes, or ask businesses to pay for posts. But asking them to pay premium rates for both is unreasonable and drives the cost of marketing on Facebook into the stratosphere. Perhaps this model works for celebrities or famous brands that can build up huge followings organically. But for small businesses that closely track their spending, Facebook Pages in their current incarnation are a bad investment.

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You stated that you “promoted” the testimonial. I assume this testimonial was written on the business fan page. Were you able to promote that post written by the fan our did you re-post the testimonial and then promote it? I can not find a feature to promote “posts by others” in Facebook. Thanks!

I love this article! It concisely shows how Facebook is ripping off small businesses. My business sees a whopping 12 viewers per post. Others say it’s a timing issue. I say it’s a Facebook issue. I like the idea of posting onto Facebook to interact with customers, fans of my business, followers of my business; whatever you want to call them. However, I don’t like having to pay to get people to follow my page, and then again to talk to them.

My company recently did a sale for small retail client with a couple dozen stores in NY/NJ. We paid $75 dollars to promote a Friends & Family sale on Facebook and it generated $75,000 in sales tied to that Facebook-only coupon.

It’s true that Facebook makes you pay to reach for you fans. Facebook isn’t free. It’s a business and entitled to make money, especially when doing so properly can result in extremely successful marketing campaigns with big ROI.

Never use the Promote on Page tool. Use Facebook’s Power Editor tool. The key is good “snackable” content and great real-time targeting.

Incentives work extremely well. Give-aways, coupons, etc. The problem starts when you have nothing to give out and you start at 0 likes. If you just feed content to the site, you’ll die. Despite fully optimizing your page, your content, and your posting, you’ll die. I think Facebook is a good medium for people willing to cough up freebies or hemorrhage money to the site. I just find it interesting that no one actually cares about news or advice. They care about free stuff and brands on Facebook and everything in between is just noise.

The important thing to remember is expectation. If you expect to run a non-profit, for example, on Facebook you’d be better off investing your time elsewhere and casually running Facebook in your spare time. Maybe you’ll generate buzz, maybe you won’t.